Rights and equitable treatment of shareholders

Shareholder powers

What powers do shareholders have to appoint or remove directors or require the board to pursue a particular course of action? What shareholder vote is required to elect or remove directors?

Shareholders appoint and remove directors and approve the reports prepared by the board regarding the status of the company and its course of action. Unless otherwise provided in the by-laws of a certain company, the shareholders may appoint and remove members of the board of directors (or sole director) by a majority vote. Pursuant to article 144 of the LGSM, in case there are more than three members of the board of directors, the by-laws shall provide the rights of the minority shareholders to appoint members of the board, but in any case, the shareholders representing 25 per cent of the capital stock of the company have the right to appoint at least one member. In SAPIs, the shareholders representing 10 per cent of the capital stock of the company shall have the right to appoint at least one member of the board of directors, and the removal of such member by the remaining shareholders (that is the non-appointing shareholders) may only take place if the shareholders are going to remove all members of the board of directors.

Pursuant to article 182 of the LGSM, the shareholders’ meeting shall appoint, remove or ratify the members of the board of directors or sole directors, at least on a yearly basis.

Shareholder decisions

What decisions must be reserved to the shareholders? What matters are required to be subject to a non-binding shareholder vote?

Pursuant to the LGSM, the shareholders’ or partners meeting is the supreme body of any commercial entity, therefore, such body has full power and authority to approve any matter concerning the company’s affairs. Whereas some matters may be resolved by either the shareholders’ meeting or the management body (whether a board of directors or a sole director), the following decisions are reserved to the shareholders:

  • the approval of financial statements and the annual report prepared by the management body the company;
  • the appointment and removal of the members of the board of directors and the statutory examiner;
  • extension of the company’s duration;
  • early dissolution;
  • increase or decrease of the capital stock;
  • change of the corporate purpose;
  • change of nationality;
  • transformation;
  • merger;
  • issuance of preferential shares;
  • share redemption or repayment;
  • bond issuance;
  • amendments to the by-laws; and
  • any other decision reserved to the shareholders pursuant to the by-laws of the company.

Under Mexican law, there are no specific matters that shall be submitted to a non-binding shareholder vote; however, the by-laws of any company may include provisions regarding the voting restrictions applicable to certain type of shares.

Disproportionate voting rights

To what extent are disproportionate voting rights or limits on the exercise of voting rights allowed?

Pursuant to article 91 VII (c) of the LGSM, companies may include in their by-laws provisions regarding the issuance of shares that:

  • do not confer or confer limited voting rights;
  • grant non-economic rights other than the right to vote or exclusively the right to vote; or
  • grant the veto right or require the favourable vote of one or more shareholders, regarding the resolutions of the general shareholders’ meeting.

Whereas some restrictions for excluding shareholders from profit sharing apply for the SA and the SRL, there is no such restriction for SAPIs.

Shareholders’ meetings and voting

Are there any special requirements for shareholders to participate in general meetings of shareholders or to vote? Can shareholders act by written consent without a meeting? Are virtual meetings of shareholders permitted?

In accordance with article 186 of the LGSM, a shareholders’ meeting shall be formally called through a notice published in the electronic system set forth by the Ministry of Economy, at least 15 calendar days in advance. However, pursuant to article 188 of the LGSM, the shareholders’ meeting shall be deemed legally installed when the totality of the shares representative of the capital stock of the company are present or duly represented in the shareholders’ meeting, regardless of the publication of the call.

Pursuant to article 192 of the LGSM, shareholders may be represented at the meetings by a proxy, who may be or may not be part of the company, but in any case, a proxy cannot be a member of the board of directors or a statutory examiner.

In addition to the foregoing, companies may include in their by-laws additional requirements for shareholders to participate or vote in the shareholders’ meeting (eg, shareholders shall present their share certificate or shall be duly registered in the shareholders’ registry book of the company).

Article 178 of the LGSM sets forth that the by-laws may provide that resolutions adopted outside a shareholders’ meeting, by unanimous consent of the shareholders, shall have, for all legal purposes, the same validity as if they were adopted in a shareholders’ meeting, to the extent they are confirmed in writing.

Shareholders’ meetings may be conducted remotely (including virtual meetings); however, the resolutions adopted in those meetings shall be approved by unanimous vote and confirmed in writing; otherwise, resolutions adopted through remote or virtual meetings may be null, inasmuch as article 179 of the LGSM provides that shareholders’ meetings shall take place in the corporate domicile of the company.

Shareholders and the board

Are shareholders able to require meetings of shareholders to be convened, resolutions and director nominations to be put to a shareholder vote against the wishes of the board, or the board to circulate statements by dissident shareholders?

The authority to call a shareholders’ meeting corresponds to the board of directors or sole director, as applicable. In SAs, shareholders who represent at least 33 per cent of the shares representing the capital stock of the company, may request the board of directors, sole director or the statutory examiner to issue the relevant call and in case of refusal or failure to do so, such shareholders may request it through a judicial authority. In SAPIs, a request may be made by the shareholders representing at least 10 per cent of the capital stock of the company.

Controlling shareholders’ duties

Do controlling shareholders owe duties to the company or to non-controlling shareholders? If so, can an enforcement action be brought against controlling shareholders for breach of these duties?

Under Mexican law, there are no specific provisions regarding special duties, such as fiduciary duty, owed by the controlling shareholders in favour of the company or the non-controlling shareholders. However, shareholders representing 25 per cent of the capital stock of an SA or 20 per cent of the capital stock of an SAPI may oppose the resolutions approved by the shareholders’ meeting through a judicial procedure, provided they have voting rights with respect to the matters approved through such disputed resolutions.

Shareholder responsibility

Can shareholders ever be held responsible for the acts or omissions of the company?

Shareholders or partners of an SA, SRL or SAPI are protected by a corporate veil, whereby shareholders or partners are only liable up to the amount of their contributions; in other words, their liability is limited to the loss of their participation in the company. However, in case a company is not duly registered with the Public Registry of Commerce (RPC), shareholders or partners may be held jointly liable for certain acts and omissions of the company in violation of tax and criminal laws (piercing of the corporate veil).